In the matter of Show cause notices issued to M/s options international (smc-pvt.) Limited On complaint filed by M/s starbucks corporation, USA

Pakistan

19.12.2018

MRTP/ Competition Laws

Where advertiser failed to show a reasonable basis or prior substantiation for claims, consumer was believed to be acting under false or misleading representation(s).

In instant matter, proceedings initiated vide Show Cause Notice issued to Options International (SMCPvt.) Limited ('Respondent' or 'Options') by Competition Commission of Pakistan (the 'Commission') for, prima facie, contravention of Sections 10(2)(d) and 10(2)(b) read with Section 10(1) of Act. SCN was issued to Respondent pursuant to Enquiry Report. Enquiry was conducted by Commission after complaint dated 7th June 2017 under Section 3 7(2) of Act was lodged by Starbucks Corporation of United States of America ( 'Complainant' or 'Starbucks') against Respondent.

Question raised in present case is whether Respondent had engaged in deceptive marketing practices in contravention of clause (d), (b) and (a) of sub-section (2) read with subsection (1) of Section 10 of Act. If so, whether Respondent could attribute alleged contraventions of Section 10 its staff/employees to offset, financial penalties which Commission might impose on them.

Act applied to all entities which were in anyway engaged, directly or indirectly, in production, supply, distribution of goods or provision or control of services in Pakistan in pursuance of clause (q) of subsection (1) of Section 2 of Act, regardless of their size and way in which they were established, financed or managed. Provisions of Section 10 of Act, mandated Commission to eliminate all causes of consumer deception or deceptive marketing practices. Prohibition under Section 10(2)(d) of Act, applied to all forms of marks, including words, numbers, logos, pictures that function as source-identifier of a product or service. Section 10(2)(d) of Act did not differentiate between a registered and an unregistered mark. With registration, a right holders' array of options for dealing with unauthorized or fraudulent use of trademark, firm name, or trade dress was likely to increase. Registered trademarks, firm name or labeling and packaging were presumed to be valid and incontestable.

Further, Respondent was well-aware that, it had no authorization or licensee relationship with Starbuck to use the STARBUCKS MARKS in any manner. At present, no undertaking was a licensee of STARBUCKS MARKS in Pakistan. Therefore, Starbucks had a valid right to initiate remedial action(s) against imitators of STARBUCKS MARKS within purview of Section 10 of Act. STARBUCKS MARKS had been duly registered and renewed with Trade Mark Registry, Karachi of Pakistan. Respondent had acted in contravention of Section 10(2)(d) of Act by imitating and adopting phonetic, visual, and conceptual designs of STARBUCK MARKS, in particular, figurative mermaid logo in white and deep green, for promotion of its coffeehouses in different cities of Pakistan. Respondent had directly or indirectly (through its employees) wilfully intended to create an association with the STARBUCKS MARKS and to encash upon the goodwill and reputation of brand to sell its products. Respondent had developed and employed vigorous marketing/promotional plans among strategies to advance its business and attract consumers. These facts remained un-contradicted by Respondent during enquiry stage and course of hearing before Bench. Under Section 10 (2)(b) of Act, any form of advertising that lacks a reasonable basis or prior substantiation was also deceptive.

Concept of reasonable basis was based on presumption that, advertised claims, expressly or impliedly, had ascertainable and substantive grounds for the claims. Where advertiser failed to show a reasonable basis or prior substantiation for claims, consumer was believed to be acting under false or misleading representation(s). Therefore, Respondent had actively been engaged in deceptive marketing practices in contravention of Section 10(2)(b) read with Section 10 of the Act. Unauthorized use of STARBUCKS MARKS by Respondent was spanned over a substantial period of time. 'While, Respondent had taken steps to remove trademark of Complainant from its Restaurant and had also stopped marketing, however, on its social media, still some images were found during instant proceedings i.e. on 15th August 2018. Further, deceptive marketing in lieu of STARBUCKS MARKS continued for a substantial time, which factor could not be ignored while imposing the penalty on Respondent. A penalty of Rs. 5,000,000 (Rupees Five Million Only) imposed on Respondent.

Tags : Deceptive Marketing Practices Penalty Imposition

Share :